Are the following statements true or false? Give reasons.
Value of average propensity to save can never be less than zero.

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Solution

False.
APS refers to average propensity to save which defines the amount of savings in every 1 rupee of income for all level of income. It can be less than zero at income levels which are lower than the autonomous consumption expenditure, which refers to minimum consumption requirement/break-even point.

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Giving reasons state whether the following statements are true or false:

(a) When marginal propensity to consume is zero, the value of investment multiplier will be 1.

(b) If the ratio of marginal propensity to consume and marginal propensity to save is 4: 1, the value of investment multiplier will be 4.

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